Analysis of a Television Production company

The house Production Services Network ( PSN ) are sing replacing a telecasting that they have at their BP Dimlington operations centre in Yorkshire. The current television still has a few old ages live left in it but the house has decided that the clip may be right to see whether buying a new one is feasible.

To measure which option is the most suited for the company ; assorted standards will be considered including whole life costs and non fiscal standards. The consequences of the whole life cost computations will be hazard assessed to further measure which option is the most suited one for the company.

2. Decision Standards

Although the whole life costs are really of import to the company, there are other factors to take into consideration when make up one’s minding upon the most suited option.

The house highlighted the undermentioned factors:

Screen Size:

Screen size is of import to the company and their employee ‘s because a larger screen size will ensue in greater employee satisfaction.

Trade name:

Brand is besides something that is of involvement to the company. The higher the repute ; the more desirable the merchandise is likely to be.

Tuners:

These include parallel, digital, freeview and freesat etc. The more tuners a television has the more channels it will be capable of having.

Picture quality:

Picture quality is a characteristic that will heighten the screening experience and therefore employee satisfaction. There are two types of image quality ; criterion and high definition. High definition criterions include 720p, 1080i and 1080p whereby 1080p is of the highest quality.

3. Suitable Options

The direction squad responsible for the choice of the telecasting has drawn up a list of feasible options.

There has been a batch of new engineering in the telecasting market late which makes the determination as to which option to choose hard. The usage of whole life costing should do the determination easier.

Option 1: –

Buy a New:

Samsung 40 ” LED backlit LCD panel

Integrated digital Freeview tuner

Typical lifetime of 7.2

Option 2: –

Buy a New:

Panasonic 37 ” Plasma

Integrated digital Freeview tuner

Typical lifetime of 7.4 old ages

Option 3: –

Buy New:

Toshiba 40 ” Liquid crystal display

Integrated digital Freeview tuner

Typical lifetime of 7.2 old ages

Option 4: –

Keep Existing Television:

4 Year Old Hitachi 32 ” Cathode-ray tube

Switchover 2011 for Dimlington in Yorkshire.

No digital tuner – Set top box needed to change over to digital.

Average CRT lifetime of 12 old ages

Therefore staying life of 8 old ages

4. Whole Life Costing

Aims:

Decide the best class of action taking into consideration all of the available options.

Constraints:

Digital Switchover

Premises:

All options have no care costs as if something does travel incorrect with them ; it is by and large cheaper to replace than mend them.

Annual repeating costs = Electricity costs merely.

All options have no salvage value at anytime due to the rate of technological promotions in the Television industry.

No income will be generated – Staff room television.

2010 typical electricity monetary value at BP Dimlingtion works in Yorkshire

= 22.147p per kW/hr

Television will be used for 10 hours daily 365 yearss a twelvemonth.

Company is capable to VAT.

Analysis period of 7 old ages.

Costss:

Option 1

Samsung costs ?679.90 new.

Power ingestion: 130W or 0.13kW

Electricity monetary value: 22.147p

Cash flow diagram

Option 2

Panasonic costs ?449.00 new.

Power ingestion: 190W or 0.19kW

Electricity monetary value: 22.147p

Cash flow diagram

Option 3

Toshiba costs ?549.99 new.

Power ingestion: 132W or 0.132kW

Electricity monetary value: 22.147p

Cash flow diagram

Option 4

Power ingestion: 204W or 0.204kW

Electricity monetary value: 22.147p

Set top box a‰? ?25 OOC

Set top box power ingestion: 7.6W

Cash flow diagram

Net hard currency flow diagram

Discount Rate:

The mean involvement rate at the minute is about 4.55 % ( AER ) .

So this value will be used in ciphering the price reduction rate because the 4.55 % is the rate which the house would be most likely to accomplish if they were to put the money alternatively.

The most accurate price reduction rate is the net of rising prices price reduction rate because it non merely takes history of gaining power of money but it takes history of clip value of money as good.

The current rising prices rate is 3.4 % . Thus the cyberspace of rising prices price reduction rate that will be used in the computations is 1.1 % .

The whole life bing method that will be used is Sobanjo ‘s ( 1999 ) return based theoretical account that uses the present worth and present worth of rente factors to cipher the NPV. Sobanjo ‘s theoretical account makes covering with non one-year repeating costs hard because they have to be represented as individual hereafter costs. As non one-year recurring costs do n’t have in this instance, it is acceptable to utilize this theoretical account.

The net present value is used despite the fact the options have different lives associated with them. This is because neither of the options have any salvage value and that the EAC attack holds really small advantage over the NPV attack in this instance due to the maximal excess life of merely 1 twelvemonth.

PW calculated for option 4 as it has an OOC at the terminal of twelvemonth 1.

PWA calculated for all options for analysis period of 7 old ages.

PWA calculated for option 4 set top box running costs for period of 6 old ages. This is because set top box is introduced at the terminal of the first twelvemonth, therefore its PWA factor will be smaller.

WLC:

Option 1:

Option 2:

Option 3:

Option 4:

5. Hazard Analysis

Sensitivity Analysis is traveling to be used because there are merely a twosome of cost elements that hold uncertainness and of which 1 is dominant in each instance.

The dominant unsure component associated with option 4 is the one-year recurring costs ; due to the fact that the figure used for the power ingestion was a typical value for CRT television ‘s which may non be a true figure for the television in inquiry.

The set top box running cost besides has some grade of uncertainness associated with it because there is no warrant that the set top box the house has suggested will still be available following twelvemonth. Thus an alternate set top box which might utilize more or less power will hold to be selected.

There is besides uncertainness associated with the one off costs due to the above point that the set top box may be unavailable or may hold increased or decreased in cost following twelvemonth. Besides there is a opportunity the television could develop a mistake and need fix or replacing.

Option 4 Hazard Analysis:

Column represents: Television ARC

Row represents: Set Top Box ARC

It can be seen from the hazard analysis tabular array above that option 4 will go more expensive than option 3 if the television one-year repeating costs entirely meet or transcend ?180 with the set top box ARC staying the same at ?6.14.

An addition in television ARC to ?180 relates to an addition in power ingestion of 19W.

There is a reasonably high chance that the television could devour 19W more than the figure ‘s used in the WLC computations due to the uncertainness in the dependability of the power figure used.

Another scenario whereby option 4 would go more expensive than option 3 would be if the television ‘s ARC was so ?165 but the set top box ARC was really of ?25.

Option 3 Hazard Analysis:

Due to the high opportunity of option 4 going more expensive than option 3 it makes sense to besides put on the line analyse option 3.

The value with highest uncertainness is the OOC ; the OOC of option 3 is zero since option 3 should endure no mistakes. However this is non ever the instance, a mistake could develop in any twelvemonth during the analysis period ensuing in a OOC for the fix or replacing of the telecasting. Whether the television is repaired or replaced will depend on the badness of the mistake and cost to mend the mistake.

From Option 3 hazard analysis tabular array ; option 3 will go more expensive than option 1 merely when the one off cost is equal to or transcend ?130 in any of the old ages.

It is rather likely that a fix would be more than ?130 but there is an equal opportunity that option 1 could endure a mistake of this magnitude.

Row represents twelvemonth

Column represents OOC

Option 3 is less sensitive to an addition of its unsure cost value than option 4.

As a consequence of its lower sensitiveness and lower chance it is apparent that option 3 is the better option.

6. Non Financial Criteria

The leaden rating method will be used to measure the non fiscal standards because it is a more nonsubjective attack than the other methods. The leaden rating method of non fiscal standard is a really helpful tool when two or more options are tied as a consequence of the whole life costing.

The standards listed earlier are ranked against each other in the matrix below which dictates the most of import non fiscal standards.

How they are ranked

Screen size:

40 ” + Score 5

33 ” – 37 ” Mark 4

28 ” – 32 ” Mark 3

22 ” – 27 ” Mark 2

Up to 22 ” Mark 1

Trade name:

PSN order of penchant

Panasonic Score 5

Samsung Score 4

Toshiba Score 3

Hitachi Score 2

N/A Score 1

Tuners:

FreesatHD + FreeviewHD Score 5

Freesat HD + Freeview Score 4

Freeview or Freesat Score 3

Analogue Tuner Score 2

NA Score 1

Picture Quality:

1080p Score 5

920p Score 4

720p ( HD Ready ) Score 3

Standard Definition Score 2

N/A Score 1

How Important

Standards

Major penchant.

4

Screen Size

Medium penchant.

3

A.

B-2

Minor penchant.

2

A-3

C-2

C-3

Trade name

No penchant.

1

B.

B-2

Tuners

D-2

C.

Picture Quality

D.

A

Bacillus

C

Calciferol

2

5

4

3

Raw Mark

6

8

10

4

Options

Weights

B/C

Entire

30

32

30

20

Samsung

0.079

24

112

40

30

12

5

4

3

5

1.

0.071

1066

4

5

3

3

Panasonic

2.

104

20

0.082

30

24

30

Toshiba

5

5

3

3

3.

0.053

62

18

35

16

2

20

2

2

8

4. Hitachi

1.

2 ; Poor

3 ; Fair

4 ; Good

5 ; Very Good

Excellent

5 Performance Scale:

1

From scrutiny of the entire it can be seen that option 1 satisfies the standards the most because it has the highest mark but when the NPV is used to find the benefit to be ratio ; it becomes evident that option 3 is really the better option as it has the highest B/C ratio.

Since Option 3 had the following lowest NPV and since it has the highest B/C ratio, it would likely be the best option to travel with despite the fact option 1 satisfies the non fiscal standards better.

To reason ; the best option and therefore the one PSN should choose is option 3 as it has a low NPV value and satisfies the non fiscal standards extremely which consequences in the highest benefit to be ratio of all the options. Option 3 was besides highlighted as the best option as a consequence of the hazard analysis because of the high chance that option 4 would go more expensive than option 3.

7. Evaluation

Whole life bing in this instance proved utile. It proved utile in that before WLC was carried out ; the initial intuition was that option 4 would most decidedly be the option to travel for due to the fact that there was no capital outgo required. After sing the entire ownership costs through the usage of WLC ; option 4 had the lowest figure.

Despite the fact option 4 had the lowest cost ; its NPV figure was a batch closer to the following cheapest option than was first envisaged therefore bespeaking that option 4 might non be such a good option after all.

WLC besides highlighted that of the staying options ; option 3 was the following best option despite the fact it required a higher capital outgo than option 2.

Although the whole life cost computations did non ensue in a clear cut reply as to which option to choose. It did nevertheless cut down the figure of viing options to two, which were later risk analyzed. The consequence of which confirmed that option 4 was non the option to travel for as it was extremely likely that it could go more expensive than option 3.

Whole life costing is an of import determination doing tool regardless of whether it defines the individual best option or consequences in more than one option of about equal entire ownership costs. If WLC does non ensue in a individual best option ; clip is n’t wasted as on about all occasions it acts as a testing tool to cut down the figure of options that need to be hazard assessed.

If WLC had n’t been used it is extremely likely that the company would hold chosen to maintain the old television or chosen option 2 as it had the lowest capital outgo of the new television options. Therefore WLC was highly utile in this instance.

The usage of WLC in concurrence with non fiscal standards and hazard analysis has proved to be a really of import determination doing tool even in this comparatively simple instance and therefore should non be underestimated.

July 22, 2017